New York Chapter 7 and Chapter 13 Debtors Can Claim Federal or NYS exemptions
New York residents are fortunate because they choose either the New York State bankruptcy exemptions or the more expansive federal exemptions. For clients that do not own real estate, the federal exemptions offer more generous allowances.
Exemptions are the reason that people can file bankruptcy without losing their assets in virtually any situation. Under both the federal and New York exemptions, most assets can be protected, including the following:
- Your home
- One vehicle per person
- Life insurance policies
- Child support and alimony payments
- Most pension and retirement plans
- Tools of your trade to a certain extent
- Social security benefits, disability, workers' compensation, and public assistance
- Personal injury claims up to certain dollar limits
- Most household furnishings
Benefits of Federal Exemptions
An individual debtor may exempt $25,150 in equity in their home. The exemptions are doubled for married couples in equity in their home. The exemptions are doubled for married couples. For individuals with significant equity in their homes, the NYS homestead exemptions will have to be claimed. However, the federal exemption is more expansive in one important aspect: it not only protects the debtor's home but, in some cases, property where the debtor's spouse or dependents live. This can matter in cases where debtors are separated or where a debtor is maintaining a home for a dependent (such as an elderly parent).
Household goods and furnishings
Individual debtors may exempt $10,775 for household items, including furniture, clothing, and appliances. The exemption is doubled for married couples.
Individual debtors may exempt $1,700 in any type of jewelry. The New York State exemptions only protect a wedding ring (not an engagement ring or other Jewelry). The exemption is doubled for married couples.
This exemption allows a debtor who does not need a homestead exemption to exempt up to $13,100 of any property of any kind, including cars, boats, jewelry, and even other real estate. The exemption is doubled for married couples. This is an incredibly valuable exemption.
Benefits of New York Exemptions
An individual debtor In Western New York may exempt $85,400 in equity in their home. The exemptions are doubled for married couples. Since most people do not have much equity in their homes because of high mortgage balances and home equity loan balances, this exemption protects almost every client from losing their home. For the rare client with too much equity in their home, chapter 13 bankruptcy may be a good option . We will never allow a client to lose their home in a bankruptcy case so long as they are not in default on their mortgages or taxes.
An individual debtor may exempt up to $4,000 in a single vehicle. Married debtors may choose to exempt $4,000 each in two separate vehicles or they may combine their exemptions and protect $8,000 in one vehicle. In our experience, we find that most people either own vehicles with loan balances that exceed the vehicle’s value or they own older vehicles that are fully protected by the exemption. Clients with excess equity in a vehicle or who own multiple vehicles can generally keep the vehicles by either striking a deal with the chapter 7 bankruptcy trustee (which we will negotiate for you) or by filing a chapter 13 bankruptcy.
Cash, Bank Accounts and Tax Refunds
If a homestead exemption is not required, then an individual debtor may protect $5,000 in cash, bank accounts and tax refunds and a married couple may protect up to $10,000. For most clients who do not own a home, this exemption is sufficient. However, for homeowners, great care must be taken to time the bankruptcy to make sure that cash assets are minimized. For example, if a client wants to file bankruptcy in December but expects a large tax refund, we may have to delay the bankruptcy filing until the following March or April.
Exempt Sources of Income Contained in Bank Accounts
The law creates an exemption of up to $2,500 for funds that are direct deposited into a bank account. The exemption is not automatic. You will have to demonstrate that at least some of the funds in the account are “statutorily exempt,” but this should not be hard to do because most potential bankruptcy clients have at least some type of exempt money going into their account. Obvious examples of exempt funds include social security, workers’ compensation, and disability.A less obvious (but very important) source of exempt funds for most people is payroll deposits. Virtually all employees now have at least a part of their earnings direct deposited into a bank account, and under CPLR §5205(d), ninety percent of wages earned during the prior 60 days are exempt from creditors.